First came cryptocurrency. Then came artificial intelligence. Then came precious metals.
Over the past five years, what we’ve seen is a parade of investment crazes, coming one after another.
The prevailing message goes like this: ‘This asset class is red-hot. Everyone is already pouring in. Why not you?’
Oh yes. This is a siren song. Too tempting to ignore. It makes you want to jump on a gravy train that’s already rolling. It’s all about FOMO (fear of missing out).
But watch out. When a particular trade gets overcrowded, it can lead to heightened risk and volatility.
That’s when a sudden reversal can happen. The siren song can change from cheerful to panicky: ‘This asset class is finished. Everyone is already pulling out. Why not you?’
A deleveraging event in January 2026. Source: Takhatiya Finance / X
That’s when we see an emotional upheaval. The price of the asset dips, then plunges. Usually, such turbulence tends to coincide with a deleveraging event.
That’s when the people who have borrowed too much get a warning from their broker. It’s a margin call. These investors must comply with minimum funding requirements. But they are already overextended. Overstretched. So they can’t possibly comply.
Therefore, their broker starts sticking the knife in, cutting ruthlessly, liquidating positions at the worst possible time.
Ouch. It hurts. It really hurts.
Source: Kevin Kal Kallaugher / X
Of course, what I find fascinating about human psychology is that it never changes. What was true 100 years ago still holds true today.
- Everyone scrambles to buy a particular asset when confidence soars.
- Everyone scrambles to sell a particular asset when confidence sinks.
- This behaviour leads to sharp price swings. Assets are either overbought or oversold. It’s the dichotomy between extreme greed and extreme fear.
Source: Charles-Henry Monchau / LinkedIn
But what if an investor is allergic to such price swings? What if he wants to avoid the volatility? Well, that leaves him with one rational option: don’t follow the crowd.
- Instead, this investor might choose to step off the beaten path. Venturing out into the wild frontier. Searching for other opportunities.
- What is he looking for? Well, assets that are unloved and unappreciated. Assets that have fallen totally off the radar.
- The rational investor understands one thing: the best time to secure an asset is when the crowd hasn’t arrived yet. His strategy is a counter-cyclical one. He’s not interested in extreme greed or extreme fear. He’s interested only in value that has been mispriced.
So forget crypto. Forget AI. Forget metals.
- There’s another asset class lurking out there in the wilderness. It has been invisible for the longest time. So much so that most investors have forgotten it exists, even though the fate of the Western world depends upon it.
- So the trillion-dollar question now is this: could the market cycle be ready to turn in its favour?
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